RadioShack (RSH) 11/16/09 PriceWatch Alert With 16.97% Downside Protection

Posted: Monday, November 16, 2009 8:25 AM EDT
By: Market Intelligence Center Staff

RadioShack (NYSE: RSH) ended the last trading session at $19.45. So far the stock has hit a 52-week low of $6.47 and 52-week high of $20.57. RadioShack stock has been showing support around 18.76 and resistance in the 19.86 range. Technical indicators for the stock are Bullish and S&P gives RSH a weak 2 STAR (out of 5) sell rating. RSH appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 17.50 covered call (RSH DW) for a net debit in the $16.15 area. That is also the break even stock price for this trade. This covered call has a 152 day duration, provides 16.97% downside protection and an 8.36% assigned return rate for a 20.07% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the RSH Jan '11 10 Call (VJY AB) and selling the Apr '10 17.50 call (RSH DW) for a $6.65 debit. The trade has a 152 day life and would provide 14.40% downside protection and a 12.78% assigned return rate for a 31.00% annualized return rate (for comparison purposes only). RadioShack has a current annual dividend yield of 1.30%. [ABR-Seven Summits Research]